he cumulative cost is total cost. It refers to the accumulated cost.

Add everything
together to get cumulative cost.

What Is a Cumulative Cost Curve?

An arrangement in which a payment not made when due is carried over to the
following period. In business, this usually refers to payments to preferred
stockholders and bondholders. If these payments are not made in the period in
which they are incurred, then they accrue to the preferred stock or bond holder.
Before any payments are made to common stockholders, the preferred stockholders
and bondholders must be paid.
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What Is a Cumulative Cost Curve?

Cost analysis allows businesses to determine the actual and anticipated costs of a project.
Cumulative cost curves provide business owners with a visual representation of cumulative costs
and benefits, allowing them to determine when they break even on a project and how project
estimates compare to expenditures. Analysis of these graphs can prevent cost overruns, resulting
in a higher return on capital investments
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5. What Is a Cumulative Cost Curve?
What Is a Cumulative Cost Curve?
By Chris Hamilton, eHow Contributor , last updated May 04, 2014

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Cost analysis allows businesses to determine the actual and anticipated costs of a project.
Cumulative cost curves provide business owners with a visual representation of cumulative costs
and benefits, allowing them to determine when they break even on a project and how project
estimates compare to expenditures. Analysis of these graphs can prevent cost overruns, resulting
in a higher return on capital investments.
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1. Benefits
o

Cumulative cost curves allow businesses to compare the estimated and actual
costs of projects and estimated payoffs and actual payoffs, which allows them to
modify projects to meet estimates. For example, a business owner who invests in
new machinery will notice when the line of actual costs rises substantially above
estimated costs, allowing him to go through current expenditures and determine
why costs are rising higher than expected. Business owners can identify projects
that do not meet estimated benefits and modify or scrap them.

Design
o

Cumulative cost curves take graph form with the horizontal axis labeled time
and the vertical axis labeled as dollars." A graph of a cost curve includes lines
representing the estimated budget upon completion of the project and the actual
costs of the project. The other two lines show the estimated payoff of a project
and the actual payoff. All of these lines usually take an s shape, because the
initial growth in costs and payoffs starts off small, grows exponentially and then
tapers off.

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Time Frame
o

Businesses will usually draw estimated cost and payoff lines on their cumulative
cost curves before they implement projects, but they may update these lines on a
monthly basis if they have to modify their projects due to incorrect estimates.
While the time frame at which they add each new value depends on the length of
the project and how closely they monitor it, business owners should update their
curves on at least a weekly basis.

Process
o

Businesses will have to mark a data point each time they calculate actual costs
and payoffs. They will determine the point on the horizontal value by the time
frame they are on, while they will determine the vertical value by adding up the
previous time frames total costs and benefits to the current time periods totals.
After marking the data point, they can use computer graphing software to draw
curves.

Considerations
o

A cumulative cost curve becomes smoother and easier to read the more frequently
a business takes values, because variances, such as an unexpected rise in expenses
over a few days, can cause fluctuations in data points. Variance can cause
managers to erroneously believe a project is under or over budget. Variance
impacts a cost curve predominately at the starting stages of a project, so
management should mark data points more frequently when starting a project.

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